JOBS NUMBERS PUSH DOWN GOLD AT WEEK’S END
This week saw Precious Metals continue their descent as Friday’s non-farm payroll numbers helped lift the stock market and put further pressure on Gold and Silver. Precious Metals prices fell today, reacting to a stronger-than-expected jobs report for June. Danske Bank analyst Christin Tuxen said that a stronger jobs report “would suggest that although rates are set to stay at record lows in Europe, that may not be the case in the United States.” The U.S. dollar rose more than one percent against competitors due to weakness in the euro, which also contributed to the losses in metals. The jobs report showed a gain of 195,000 jobs in June, though the unemployment rate was unchanged at 7.6 percent due to an increase in the labor force of 177,000. The jobs readings from April and May were revised upwards as well. The good economic news has many investors believing that the Federal Reserve’s tapering of its quantitative easing program could indeed be coming soon, putting pressure on the price of Gold.
Prior to the July 4th holiday, Egyptian upheaval and continued financial woes in Portugal helped give Gold a moderate boost. The safe haven appeal of Precious Metals temporarily resumed following political turmoil these regions. “Rising tensions in Egypt and re-emergence of the European crisis, along with the mixed data” combined to underpin Gold prices Wednesday, according to a Precious Metals dealer chief market analyst. As hastening violence erupted in Egypt, austerity difficulties in Portugal re-focused the spotlight on the eurozone as Portuguese debt and frantic stock selloffs highlighted troubles in the region. Domestic investors awaited Friday’s nonfarm payroll data to see if the reports would incite movement in Precious Metals markets that are currently in a tug-of-war with bargain hunting physical buyers and ETF sellers.
ECONOMIC DATA DRIVING STOCKS; WEIGHING ON GOLD
Earlier this week, the Gold price was still struggling against a strong U.S. dollar. On Tuesday, Gold gained much of the ground lost last week, but those gains were short lived as money managers used the opportunity to sell out of long positions. Phillip Streible, senior commodities broker at R.J. O'Brien in Chicago, said, “The dollar index is strengthening quite a bit, equities are strengthening and you're seeing interest rates go up. That seems to be the perfect storm against the metal at the moment.” Investors seemed hesitant to move much before the holiday. The Dow Jones Industrial Average and S&P 500 were both up Tuesday following news that U.S. factory orders improved for May. It appears as though equities markets have made the necessary adjustments, being bolstered by QE to make gains based on positive economic data. As we await corporate earnings reports, set to begin next week, the perception of domestic strength and the validity of economic recovery are expected to be the factors that future market improvements will hinge upon. A strong reading in today’s jobs numbers was expected to be positive for the dollar and another blow to Gold.
GOLD PRODUCTION COULD SLOW
After a second quarter slide that saw Gold fall more than 23 percent, the yellow metal started July with strong gains. Following the recent decline that sent Gold through many key technical levels, a price jump earlier this week was due to a drove of backfill orders placed by bargain hunting investors. Along with discussion that the U.S. Federal Reserve will begin tapering quantitative easing, the “strengthening of the [U.S. dollar], unwinding of the global carry trade and tame global inflation” according to experts have all amalgamated to drive Precious Metals prices down the last couple months. However, with prices being so low, Gold producers are second guessing the profitability of their endeavors. The world’s largest Gold miner, Barrick Gold Corp., recently postponed the launch of a South American mine by two years. Experts predict many other producers will suspend production unless the Gold price can rebound enough to once again make manufacturing lucrative.
At 5:27 p.m. (ET), the APMEX Precious Metals spot prices were:
- Gold, $1,224.90, Down $29.50.
- Silver, $18.95, Down $0.84.
- Platinum, $1,328.10, Down $18.70.
- Palladium, $681.60, Down $4.10.
For more APMEX reviews of daily and weekly Precious Metals market activities, visit our News and Commentaries page.
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